ar10-11 asian paints

8/3/2019 AR10-11 Asian Paints

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ANNUAL REPORT 2010 - 20


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CONTENTS

Management Discussion and Analysis 14 Directors Report 24 Auditors Report 32 Balance Sheet 36

Prot and Loss Account 37 Cash Flow Statement 38 Schedules 39 Auditors Report on Consolidated

Financial Statements 75 Consolidated Balance Sheet 78 Consolidated Prot and Loss Account 79

Consolidated Cash Flow Statement 80 Schedules to Consolidated Financial Statements81 Report onCorporate

Governance 110 General Shareholder Information121 Notice


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Board of DirectorsASHWIN CHOKSI

Chairman

ASHWIN DANIVice Chairman

ABHAY VAKIL

P.M. MURTYManaging Director & CEO

MAHENDRA CHOKSIAMAR VAKILMrs. INA DANI*Ms. TARJANI VAKIL

DIPANKAR BASUMAHENDRA SHAHDEEPAK SATWALEKARR.A. SHAHDR. S. SIVARAMS. RAMADORAI

Company SecretaryJAYESH MERCHANT

Share Transfer CommitteeABHAY VAKIL

Chairman

ASHWIN CHOKSIASHWIN DANIJAYESH MERCHANT

Ad hoc CommitteeDEEPAK SATWALEKARChairman

Ms. TARJANI VAKILDIPANKAR BASUMAHENDRA SHAH

AuditorsSHAH & CO.Chartered Accountants

B S R & ASSOCIATESChartered Accountants

Audit CommitteeMs. TARJANI VAKIL

Chairperson

DIPANKAR BASUMAHENDRA SHAH

Shareholders / InvestorsGrievance CommitteeMAHENDRA SHAHChairman

ABHAY VAKILP.M. MURTY

MAHENDRA CHOKSIMrs. INA DANI

Remuneration CommitteeDIPANKAR BASUChairman

Ms. TARJANI VAKILDEEPAK SATWALEKAR

* Appointed as an Additonal Director w.e.f. 27th July, 2010


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DIRECTORS

DEEPAK SATWALEKAR

ABHAY VAKIL P.M. MURTY

MAHENDRA CHOKSI AMAR VAKIL Mrs. INA DANI Ms. TARJANI VAKIL

DIPANKAR BASU MAHENDRA SHAH R.A. SHAH

DR. S. SIVARAM S. RAMADORAI

ASHWIN CHOKSI ASHWIN DANI


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CHAIRMANS LETTER

Dear Shareholders,

It is my privilege to communicate with you at the end ofanother successful year for Asian Paints.

The nancial year 2010-11 was one in which both theworld as well as the Indian economy showed resilience.

While the global economy rebounded amidst fears ofa double-dip recession, the Indian economy surgedahead on the back of its strong fundamentals. Therewere and are concerns that cannot be ignored: highination and shortage of liquidity in India; the aftermathof the dreadful earthquake and tsunami in Japan;sovereign debt crisis in several countries in the EU;and uprisings in the Middle East and the impact on oilprices. These have had and continue to have an impacton the business environment.

The biggest impact on your Company was high increasein material costs. This was primarily due to spiraling cost

of key items like titanium dioxide, monomers, crude-based derivatives, etc.

In spite of this, your Company achieved a revenuegrowth of 23.4% while net prot remained at in itsstandalone operations. This makes it a 5 year CAGR of22.2% in revenue and 32.9% in net prots.

Our Decorative business achieved good growth aidedby buoyant demand across geographies. Its interestingto note that demand from rural and smaller towns weresignicantly better than large cities and towns of thecountry.


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Due to high ination in material prices, ve priceincreases aggregating 12% were implemented duringthe year.

We persisted with our mission of building strengths andcapabilities for the future which will help us achieve longterm market growth to further consolidate our leadership

position. The focus continued to be on initiatives toincrease customer satisfaction, improving our productmix, expanding the dealer network and enhancing ourmanufacturing and supply chain capabilities. We feelthat our stress on customer centricity will go a long wayin creating a sustainable and competitive advantage foryour Company.

To keep pace with the increasing demand for ourdecorative coatings year-on-year, your Company iscontinually investing in augmenting its manufacturingcapabilities. In April 2010, the state-of-the-artmanufacturing facility at Rohtak in Haryana was

commissioned with an initial capacity of 150,000 KiloLiters (KL) per annum. Your Company plans to increasethe installed capacity at this plant to 200,000 KL perannum by fourth quarter of FY 2011-12. You will bealso happy to learn that construction work for yourCompanys proposed seventh decorative paint plant inKhandala, Maharashtra has commenced after obtainingthe requisite permissions. Your Company expects tocommission this plant by end of FY 2012-13 with aninitial capacity of 300,000 KL per annum.

Your Companys Joint Venture with PPG IndustriesInc., Asian PPG Industries Limited performed wellaided by good demand for automotive coatings.Although demand environment for nonautomotiveindustrial coatings was challenging in FY 2010-11,we are optimistic about the growth opportunitiesthat exist in this segment going ahead. A testimonyto this optimism is the announcement of our plans toenhance the fourteen year old relationship with PPGby forming a new 50:50 joint venture for servicing theprotective, powder coatings, industrial containers andlight industrial coatings markets. This new joint venturewill leverage PPGs technology and global customerrelationships while continuing to build on Asian Paintscustomer base, manufacturing footprint, distributionchannels and local relationships.

FY 2010-11 was a challenging year for our InternationalBusiness Unit with many of our overseas subsidiariesstill impacted by global economic slowdown. Therecent uprisings in Egypt and Bahrain, which weremarkets that were performing well, have added tothe uncertainty; normalcy is yet to return to those twomarkets. Our South Asian units in Nepal, Sri Lanka andBangladesh, however, proved to be the silver liningas they registered good growth during the period. TheInternational Business Unit is now well positioned tocapitalize on growth opportunities that may emerge,

after having divested its loss making subsidiaries inSouth East Asian market in the nancial year 2009-10.

While there is still some nervousness about the globaleconomy, India seems rmly set on the growth path.Consumer demand is strong, exports are rising andinvestment is picking up. Most important, the macro-

fundamentals of our economy are sound despite factorslike high ination.

The road ahead for FY 2011-12 is not devoid of obstacles;some immediate ones being the surging ination in rawmaterial prices which is putting pressure on margins,suppressed demand conditions in the Middle East andCaribbean regions and the uncertainties prevailingin the global economy specically with respect tosovereign debt crisis in some of the European Unioncountries which could have global repercussions ondemand conditions. But your Company has always risenabove challenges; driven by its resilience, foresight and

strategic direction and I am sure this year will be nodifferent.

Your Company has always followed the higheststandards of Corporate Governance and considersit as more of an ethical requisite than a regulatorynecessity. Its a matter of great pride that our successover the years, have come without ever compromisingon integrity, our environmental and social obligationsor regulatory compliance. Moreover, going aheadwe commit to continually update and strengthen yourCompanys governance structures.

Success of any business enterprise like your Company

can only be possible because of its employees andpeople who put in unrelenting efforts to rise to excellence.I would like to reiterate that your Companys employeesare its greatest asset and it is entirely due to their hardwork, perseverance, commitment and dedication thatyour Company has been able to deliver superior growthand value creation with every passing year. I sincerelythank all our shareholders, business partners and ourcustomers for the continued support and faith reposedin your Company. I would like to assure you that yourCompany would continue to remain committed to deliverstrong growth and enhance shareholder and customervalue in every possible way we can.

Warm regards,

Yours sincerely,

Ashwin Choksi


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HIGHLIGHTS

Standalone

Net Sales & Operating Income

increased by 23.4% to ` 6,322.2 croresn

PBDITincreased by 6.8% to ` 1,232.7 crores

n

State-of-the-art paint manufacturing facilitycommissioned at Rohtak in Haryana with an initial capacity of 150,000 KL

per annum scalable to 400,000 KL per annumn

The Board of Directors

have recommended a nal Dividend of ` 23.5 (Total Dividend for the year is ` 32)

Group

Net Sales & Operating Incomefor FY 2010-11 increased to ` 7,706.2 crores

n

PBDITfor FY 2010-11 stood at ` 1,395.6 crores

n

New paint manufacturing facilityset up at Egypt with an initial capacity of 50,000 KL per annum

scalable to 150,000 KL per annum


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PERFORMANCE HIGHLIGHTS - STANDALONE

`

in

crores

Net Sales & Operating Income, PBDIT & PBDIT Margins (%)

Net Sales &Operating Income

PBDIT

PBDIT Margins (%)

0

1000

2000

3000

4000

5000

6000

7000

8000

2010-112009-102008-092007-082006-070

5%

10%

15%

20%

25%

2821

464

16%

18%

15%

23%

20%

3419

615

4270

619

5125

1154

6322

1233

`i

n

crores

Profit Before Tax & Profit After Tax

0

200

400

600

800

1000

1200

2010-112009-102008-092007-082006-07

412

272

563

375

546

362

1,105

775

1,123

775

PBT after

exceptional items

PAT


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0

200

400

600

800

1000

1200

2010-112009-102008-092007-082006-07

`

in

crores

Cash Generated from Operations

461

633

500

1,1411,097

0

500

1000

1500

2000

2010-112009-102008-092007-082006-07

`

inc

rores

Average Capital Employed and Return on Average Capital Employed

0

10%

20%

30%

40%

50%

60%

70%

80%

792

946

1,096

1,397

1,833

53%

61%

51%

78%

62%

Average CapitalEmployed

Return on AverageCapital Employed


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0

3400

3800

4200

4600

5000

2010-112009-102008-092007-082006-07

No.ofEmployees

Employees at the year end and Turnover per Employee

0.00

0.30

0.60

0.90

1.20

1.50

3924

4260

4382

4640

0.73

0.87

1.00

1.17

1.36No. of employees

Turnover per employee

(` in Crores)

3868

Dividend per share, Earnings per share and Dividend pay-out ratio

0

10

20

30

40

50

60

70

80

90

100

2010-112009-102008-092007-082006-070

10%

20%

30%

40%

50%

60%

in

`

Dividend per share

EPS before exceptional item

Dividend payout ratio(including dividend distribution tax)

13

52% 51%

54%

39%

46%

28

17

39

17.5

38

27

78

32

81

0

200

400

600

800

1000

1200

2010-112009-102008-092007-082006-07

`

in

crores

Net Fixed Assets and Asset Turnover Ratio

0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

335

429

623

707

1,057

8.48.0

6.9

7.2

6.0

Net Fixed Assets(excluding capital work-in-progress)

Assets Turnover Ratio


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0

5000

10000

15000

20000

25000

2010-112009-102008-092007-082006-07

`i

n

crores

Market Capitalisation

7,336

11,510

7,539

19,593

24,238

Percentage sales contribution of each

region to overall international operations

Middle East | 52.2%South Pacific | 7.6%

Asia | 24.3%

Caribbean | 15.9%


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MANUFACTURING PLANTS IN INDIA

1982

Gujarat

ANKLESHWAR

Maharashtra

BHANDUP1958

Gujarat

SARIGAM(APICL)

2001

TamilNadu

PENTA-CUDDALORE

1984

1985

AndhraPr

adesh

PATANC

HERU

1989

UttarPradesh

KASNA

Gujarat

PHTHALIC - ANKLESHWAR1987

TamilNadu

SRIPERUMBUDUR

2005

2006

HimachalPrades

h

BADDI(APICL)

Haryana

ROHTAK

2010

Maharashtra

2007 TALOJA


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PRODUCT PORTFOLIO

EXTERIORS - WALLS INTERIORS - WALLS

ENAMELS

WOOD FINISHES


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14

MANAGEMENT DISCUSSION AND ANALYSIS

The global economy staged a remarkable rebound

in the last nancial year reducing the fears of a

double-dip recession that some had forecast in

2009. The recovery was aided by the continuation

of stimulus measures adopted during 2008-09 by

developed as well as emerging economies including

India. Increased liquidity in the developed economies

impacted sentiment and boosted consumption as

well as investment. Emerging markets neared their

pre-recession growth levels on the back of domestic

demand and buoyant exports while developed

economies began to show pickup in demand.

However, globally, the year was also characterized by

periods of high uncertainty. The sovereign debt crisis

that engulfed Greece and Ireland also threatened anumber of other euro economies jeopardizing the

stability of global nancial markets. Short term policy

interventions by the concerned governments did help

to avert a crisis situation but a lot still needs to be

done for any signicant fundamental improvement in

the nancial conditions of some of these countries.

During the second half of the year, mass uprisings

in Egypt, Libya and some other MENA countries

sent crude prices over the USD 100 per barrel mark.

Brent spot, an important indicator for crude went up

by 41.7% during the year and 22.1% during the last

quarter of FY 2010-11. The environment continues to

remain challenging on this front.

India maintained its growth momentum on the

foundation of relatively strong fundamentals of the

economy. The year saw one of the highest rates of

ination in recent times and RBI increased the repo

rates and reverse repo rates from 5% and 3.50%

to 6.75% and 5.75% respectively in a bid to curbination. However, strong domestic consumption and

buoyant exports, enabled GDP to grow by around

8.5% during 2010-11. The rupee also remained

range bound against US dollar to the comfort of both

the exporters and the importers.


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15

1. PRODUCTS AND MARKETS

The paint industry volume in India has been

consistently growing at more than 15% per annum for

some years now. The strong growth was supported

by a favourable monsoon and good industrial growth

especially in the automotive sector. Growth in turnoverwas signicantly higher than the volume growth as

large price increases had to be effected during the

year.

In International Business, political turmoil in Egypt

and Bahrain impacted business conditions in these

countries during the last quarter of the year. While

South Asian markets fared relatively better, the impact

of economic slowdown persisted in some of the other

international markets where your Company operates.

DECORATIVE PAINTS

Decorative paints (including interior and exterior

wall nishes, enamels, wood nishes and ancillary

products) constitutes around 72% of the paint market

in India. 2010-11 was a good year for the paint

industry and your Company too did well.

Sharp increase in raw material prices was one of

the key concerns identied by your Company for

FY 2010-11 and as expected, it posed signicant

challenges throughout the year. The recovery of

the global economy leading to a revival of demandespecially in countries like India, China and the U.S.,

coupled with the rise in crude prices and shortage

of key raw materials has led to a steady increase in

prices across all categories of raw materials. In India,

factors like power shortages, increase in labour and

transportation cost also contributed to the ination.

The overall impact of ination during the year was

in excess of 13%. This was countered through price

increases at regular intervals (ve in all totaling

over 12% for the year). Fortunately, this substantial

increase in prices did not affect demand which

continued to be robust. Margins, however, were

under severe pressure during the year and continue

to be a concern going forward.

Net Sales grew ahead of volume sales on account of

higher realizations due to a richer product mix as well

as price increases. Emulsions have been growing

much faster than the other categories of paints. Your

Company saw success with many premium products

like Apex Ultima, Royale, Royale Shyne, Royale Play,

Polyurethane wood nishes and water based enamels.

After the overwhelming response to your Companys

Signature Store at Mumbai, your Company has

decided to invest in another store at Connaught

Place, New Delhi which will be opened shortly.

Your Company continued to expand its dealer

network across all parts of the country. The expansionof Colourworld network also continued unabated with

more than 18000 of your Companys dealers being

covered currently. Most of the emulsion paint sale is

happening through this network.

Considerable investments were made in upgrading

over 3000 retail outlets with the overall objective of

improving the ambience, providing better service and

more information to consumers at these outlets.

Your Company also signicantly expanded the chain

of stores called Colour Ideas, where the consumeris provided with an environment wherein he can

experience what colour can do to his home. Here he

is also provided with Colour Consultancy Services.

Consumers have responded very positively to this

retail chain and your Company is in the process of

expanding it across the country.

During the year, your Company launched a number of

new products. Water based wood nishes launched

in North India would be launched across the country

in a phased manner. New textured nishes for the

exteriors Duracast Pebbletex and Crosstex werelaunched and met with good response from builders/

contractors for large projects.

After commissioning of the Rohtak Plant in

April 2010, the total installed paints capacity in

India stands at close to 6,00,000 KL. The synthetic

resins and polymer capacity was also augmented by

50,000 MT in FY 2010-11.

In the rst year of its operations, Rohtak Plant

produced in excess of 80,000 KL of paints.

Continuing ahead with its capacity expansion plans,your Company will increase the installed capacity

at the Rohtak Plant from 150,000 KL per annum to

200,000 KL per annum by fourth quarter of

FY 2011-12.

Construction has also commenced at Khandala near

Pune (in Maharashtra) for the seventh Decorative Paints

plant with an initial capacity of 300,000 KL per annum

of paints with an investment of around ` 1000 crores.

The plant will be commissioned sometime around the


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16

last quarter of FY 2012-13. The Khandala plant can be

expanded to 400,000 KL per annum later.

These capacity additions would enable your

Company to adequately meet the envisaged demand

in the Indian market. The availability of power supply

is, however, a matter of concern in Rohtak while inother plants, the reliability of continuous supply can

be an issue. Your Company is, therefore, forced

to rely on self generated power in these locations,

which is not cost effective.

Construction of the Distribution Centre at Patancheru

Plant is also underway and by the second half-year

of FY 2011-12, all Plants would have an operating

Distribution Centre allowing complete migration to

the new Distribution Model which would facilitate

higher service levels at lower levels of inventory.

INTERNATIONAL OPERATIONS

The nancial year 2010-11 began on a challenging

note. The International markets where your Company

operates in, continued to be impacted by the economic

slow down, although the South Asian countries were

relatively less impacted. In addition, political turmoil in

Egypt and Bahrain has impacted business conditions

in these countries in the last quarter of the year.

Asian Paints International Limited, the Mauritius

based subsidiary of your Company, bought the 80%

stake in Samoa Paints Limited held by its subsidiary

Taubmans Paints Fiji Limited for a consideration of

US$ 0.5 million.

The focus in the International operations during the

year was on strengthening position in the market

place by initiatives to improve customer centricity,

expanding the dealer network, improving service

levels, introducing new products and installing

additional dealer tinting systems. Emphasis was

also placed on tighter management of credit risk

and improving internal efciencies in all areas of

operations including working capital, xed assets,

overheads and material cost. Sharp focus was

accorded to enhance safety standards.

Material prices during the year were volatile and saw

an inationary trend due to shortages in critical raw

materials and rising prices of crude oil. The impact of

ination was mitigated to some extent by formulation

re-engineering, economies of scale in purchasing,

inventory build up and reducing losses in manufacturing.

The revenue from paint sales of the overseas

operations of the group for the year is ` 975 crores as

compared to ` 979 crores during the previous yearApril 2009 - March 2010.

Prot after tax for the overseas operations of the

group during the year is ` 87.9 crores compared

to ` 104.7 crores during the previous year

April 2009 - March 2010.

The revenue from paint sales of Berger International

Limited, a subsidiary listed on the Singapore Stock

Exchange has decreased by 16% to S$ 108 million

(equivalent to ` 372 crores) from S$ 129 million

(equivalent to`

430 crores).

The group operates in the following geographies:

The region wise performance is detailed below:

Caribbean

During the year under review, the revenue from paint

sales has decreased by 3% to ` 157 crores from

` 161 crores. Adjusted for exchange rate impact, the

revenue from paint sales has increased by 0.2%.

PBIT (Prot before interest and tax) for the region has

increased by 12% to ` 12 crores. An all round slowdown in construction activity and reduction in tourism

had a severe impact on the Caribbean economies

and hence the top line performance of the region was

impacted. However, all the subsidiaries in the region

have been protable.

Middle East

During the year under review, the revenue from paint

sales has decreased by 4% to ` 516 crores. Adjusted

Region Countries

Caribbean Barbados, Jamaica, Trinidad & Tobago

Middle East Egypt, Oman, Bahrain & UAE

Asia Bangladesh, Nepal, Sri Lanka &

Singapore

South Pacic Fiji, Solomon Islands, Samoa,Tonga & Vanuatu


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17

for exchange rate impact, the revenue from paint

sales has increased by 2%. PBIT for the region has

decreased by 38% to ` 65 crores.

The Middle East region is the largest operating

region for the group outside India. The region now

contributes 52% of the revenue from overseas

operations. All the economies in the region have been

impacted by the global recessionary trend with the

impact being the most severe in UAE. Additionally,

the performance of the subsidiaries in Egypt and

Bahrain was also affected in the last quarter due to

the political turmoil in those countries. However, all

the subsidiaries have made prot.

The green eld plant in Egypt with an initial capacity

of 50,000 KL per annum is now fully operational.

The plant has been designed to eventually produce

150,000 KL per annum.

Asia

For the year under review, revenue from paint sales

has increased by 20% to ` 240 crores. Adjusted for

exchange rate impact, the revenue from paint sales

has increased by 21%. The PBIT for the region has

decreased by 10% to ` 24 crores.

Expansion of the Color World dealer network

and increased inuencer interactions through

painter-dealer meets coupled with the recovery in the

construction sector has helped all the subsidiaries to

achieve healthy sales growth. All the subsidiaries

have made prot.

South Pacic

For the year under review, revenue from paint sales

has increased by 4% to ` 75 crores. Adjusted for

exchange rate impact, the revenue from paint sales

has increased by 5%. The PBIT for the region has

increased by 16% to ` 13 crores. All the subsidiaries

in the region have made prot.

INDUSTRIAL COATINGS

Automotive Coatings: Asian PPG Industries

Limited (APPG)

Your Company has a 50:50 Joint Venture (JV) withPPG Industries Inc., which was formed in the year

1997, for manufacturing Automotive OEM, Renish

and certain other Industrial Coatings. APPG is the

second largest automotive coatings supplier in the

country.

The Indian automobile industry witnessed a

phenomenal growth during FY 2011-12, reaching

sales of almost 3 million passenger vehicles.

Indian automobile market is on course to a high

A view of the new facility at SCIB Chemicals S.A.E., Egypt


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18

growth trajectory owing to the overall economic

fundamentals and increasing disposable income

of the working class. Good market conditions have

helped APPG further strengthen its presence in the

market. Total sales increased to ` 616.48 crores in

FY 2010-11 from ` 476.88 crores in FY 2009-10

a growth of 29.3%. The prot after tax rose to

` 33.03 crores from ` 28.58 crores representing

a growth of 15.6%. The consolidated sales were

` 637.77 crores and the prot after tax was

` 33.62 crores in FY 2010-11.

Faaber Paints Private Limited (FPPL), a wholly

owned subsidiary of APPG, reported sales of

` 23.26 crores in FY 2010-11 as compared to

` 15.0 crores in the previous year. Prot after tax

declined to ` 0.7 crores as compared to ` 1.47 crores

in the previous year.

Major improvements were effected in appearance,

quality and durability of products offered to

customers during FY 2010-11. Measures adopted to

contain costs and expand volume of business paid

off and helped APPG achieve its targets in spite of

concerns on raw material prices and availability.

Competition amongst the coatings suppliers is also

giving leveraging power in the hands of the customer

forcing prices down. APPGs strategy of offering

better value to its customers by providing superiorproducts and service has enabled it to deliver superior

results. In its maiden foray outside India, APPG has

also decided to enter the Sri Lankan Auto Renish

market by setting up its own subsidiary. This wholly

owned subsidiary is expected to be operational by

July 2011.

The licensed capacity of the facility at Sriperumbudur

is 10,400 KL per annum; the present installed

capacity is 7,500 KL per annum. APPG has decided

to further expand the capacity of the plant to9,140 KL at a cost of approximately ` 30 crores.

The prospects of continuing high price of fuel and

uncertain economic conditions have led to doubts about

sustainability of the pace of growth that the automotive

industry has witnessed in the recent past. However,

while there may be a slow down temporarily owing to

high base effect, APPG is condent about the long term

prospects of the industry and feel that it is in a position

to take advantage of the growth in the market.

NON AUTO INDUSTRIAL COATINGS

The non auto industrial coatings market is serviced

by your Company through its Growth Business Unit

(GBU) and a wholly owned subsidiary, Asian Paints

Industrial Coatings Limited (APICL). The major

product segments are

Protective Coatings

General Industrial Coatings

Road Marking Coatings

Floor Coatings

Powder Coatings

Demand for industrial products improved in the

second half of FY 2010-11 against a modest increase

during the rst half, peaking towards the end of thescal year. The improvement in demand was mainly

on account of various projects reaching the stage of

painting during the second half of the year.

Your Companys strategy of focusing on sales of

middle to high end products has resulted in an

improvement in the mix of products sold. There has

been an increase in the weighted average selling

price on account of the improved product mix.

The inationary trend in major raw material prices

that had commenced in the last quarter of scal year09-10 continued through the year and prices of most

major raw materials increased steeply during the

course of the year. This trend was witnessed across

almost all major raw materials such as pigments,

resins, solvents, oils and monomers. Increased

raw material costs combined with resistance from

customers to accept the steep increase in prices

exerted pressure on margins through the year.

The Industrial Paints plant at Taloja completed its

fourth year of operations in February 2011. The rstlong term settlement with the workers union was

negotiated and signed in January 2011. Though

production was affected during the negotiation

process, particularly during the third and fourth

quarters of the scal year, the industrial relations

situation has normalized after the settelment

and production levels have been restored to

expected levels. Production was stepped up at Toll

Manufacturers to cover the shortfall in production.


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19

ASIAN PAINTS INDUSTRIAL COATINGS LIMITED

Asian Paints Industrial Coatings Limited (APICL),

a wholly owned subsidiary of your Company, is

engaged in the manufacture and sale of Powder

Coatings. There was a modest improvement in

demand conditions during the year and the salesperformance of APICL during the year reected

this market situation. The two powder coating

manufacturing facilities located at Sarigam (Gujarat)

and Baddi (Himachal Pradesh) operated satisfactorily

to meet market requirements.

As in the case of industrial liquid paints, a steep

increase in the prices of all critical raw materials such

as epoxy and polyester resins and pigments was

seen during the year. Resistance from customers

to the steep price increases that were asked for

resulted in pressure on margins.

PARTNERSHIP WITH PPG

Your Company has a long standing and successful

relationship with PPG Industries Inc. which is based

in Pittsburgh, USA. It had formed a Joint Venture (JV),

Asian PPG Industries Ltd., with PPG in 1997, to cater

to the growing requirements of the global automakers

entering into the Indian market. APPG is now one of

the leading coatings suppliers in the Automotive OE

sector and is the leader in the Auto Renish sector.PPG is also present in other industrial businesses in

India through its two subsidiaries.

In order to further strengthen this relationship, your

Company is in the process of forming a second 50:50

Joint Venture with PPG, which will focus on Protective

Coatings, Light Industrial Coatings, Industrial

Container Coatings and Powder Coatings in the

Indian market. This Joint Venture will leverage the

signicant expertise, market presence and channel

access of your Company in the domestic marketwith the considerable global scale and technology of

PPG. Your Company will have effective management

control of this new JV.

APPG, the existing 50:50 JV in the area of

transportation coatings, will now additionally cover

Marine Coatings, Consumer Packaging Coatings

and Other liquid industrial coatings segments. PPG

will have effective management control of this JV.

Industrial Paints Plant (at Taloja) and APICLs two

powder coating plants at Sarigam and Baddi will

continue to be a part of your Company and APICL

respectively and will not form a part of the new JV.

The JVs production requirements will continue to be

produced by these industrial plants under a tolling

arrangement.

The formation of JV involves certain statutory and

procedural formalities to be complied with. As a rst

step to the JV formation, a new Company named

AP Coatings Limited (100% owned subsidiary of

your Company) was formed by your Company. Till

the formation of new JV, the Industrial business of

your Company as well as the business of APICL will

be carried out by AP Coatings Limited.

AP Coatings Limited, along with the two companies

of PPG in India, will be merged into APPG and

subsequently the relevant businesses demerged

to form the second 50:50 JV through a composite

Scheme of Merger and De-merger as approved

by High Courts of respective jurisdictions of all the

Companies involved.

OTHERS

Your Company also produces Phthalic Anhydride

and Pentaerythritol in manufacturing facilities

located at Ankleshwar (Gujarat) and Cuddalore

(Tamil Nadu), respectively. These units which were

set up as backward integration initiatives in the late1980s, primarily cater to in-house demand for these

chemicals.

During the year FY 2010-11, 69% of Phthalic

Anhydride and 54% of Pentaerythritol produced

by your Company was transferred for internal

consumption. The remaining quantity was sold in the

open market.

Plant shut downs during the year owing to a planned

catalyst change operation and some unanticipated

stoppages in plant operations resulted in production

of Phthalic Anhydride being lower than last year.The lifting of safe guard duty on imports from several

countries also resulted in cheap imported material

coming into the country, impacting prices in the

local market. Overall, protability from the Phthalic

Anhydride business was affected due to the lower

production and adverse market conditions.

The protability of the Pentaerythritol business

was higher compared to previous year. Better sales

realization resulted in higher margins from the business.


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2. ENVIRONMENT, HEALTH AND SAFETY

Environment, Health and Safety (EHS) is one of the

primary values for your Company. Your Companys

EHS policy is to consider compliance to statutory

EHS requirements as the minimum performance

standard and is committed to go beyond and adoptstricter standards wherever appropriate. Your

Company focuses on pollution abatement, resource

optimization and waste minimization, which leads to

sustainable development. Your Company also gives

priority and attention to the health and safety of its

employees and trains all the employees to work as

per prescribed procedures designed to meet all EHS

requirements. Your Company also endeavours to

educate its customers and the public on safe use of

its products.

Due to continued focus on Environment and Safety,

the Penta plant was given the Environmental Best

Practices Award - 2011 at a national level competition

organized by CII - Green business Centre, the

Ankleshwar plant was nominated by Gujarat Cleaner

Production Center and Gujarat Pollution Control

Board for exhibiting its cleaner production initiatives

in an international environmental forum of Earth

Charter organised by Center for Environment

Education, Ahmedabad and the Sriperumbudur plant

was presented with the Tamil Nadu State Safety

Award by Inspectorate of Factories, Tamil Nadu foroutstanding safety performance.

Your Company received consents from Maharashtra

Pollution Control Board and Environmental

Clearance from State Environment Impact

Assessment Authority of MoEF in Maharashtra for

establishing the Khandala Plant in Maharashtra.

APICLs Sarigam plant for manufacture of powder

coatings has been awarded consents for expansion

by Gujarat State Pollution Control Board without any

increase in pollution load.

Your Companys six paint plants and the two

chemical plants have the ISO 14001 environmental

certication. Your Companys seven paint plants and

one chemical plant are Zero Industrial Discharge

plants and harvest rain water. Rohtak plant is working

towards obtaining the ISO 14001 certication.

Your Company has always been environmentally

conscious and believes in resource conservation.

After achieving Zero Discharge of industrial efuent,

minimization of waste through reduction at source

and recycle /reuse has been a key focus area.This

has resulted in reduction in specic generation of

efuents and solid wastes.

Your Company also appreciates the need to monitorand reduce emission of Green House Gases (GHGs)

which are responsible for Global Warming and Climate

Change. It has institutionalized a mechanism to monitor

GHGs emissions across all business units as per Green

House Gas (GHG) protocol [A Corporate Accounting

and Reporting Standard by World Business Council

for Sustainable Development]. GHGs emissions

monitoring has been categorised under Scope 1 -Direct GHG emissions (due to fuel consumption) and

Scope 2 - Indirect GHG emissions due to electricity

consumption (electricity bought from power generation

companies) over which your Company has got direct

control. Your Company has focused its efforts on

enhancing energy efciency in all its operations, right

from the design of new manufacturing facilities. Your

Company is participating in Carbon Disclosure Project

(CDP) for disclosing information on carbon emissions.

3. HUMAN RESOURCES

The year 2010-11 has been quite signicant for

Human Resource where several initiatives were

taken forward. Talent Management was taken up

as a specic focus area in HR towards integrating

employee Development and succession planning.

`Learnscape is an ambitious initiative in the area

of Learning and Development that your Company

launched. This initiative seeks to dene for our

managers and executives the expectations around

Asian Paints way of managing people and thereafter

a series of initiatives to skill employees at every level

was launched this year. At the core of this initiative

has been the focus on conversations that participants

have had with several leaders within and outside the

organization, thus enabling a process of engagementand connectedness with the environment.

Your organization has also worked on leveraging

information technology to aid the developmentprocess for employees. With tie-ups with renowned

organizations like Harvard Business Publishing and

Skillsoft and combined with several custom built

modules, we have enabled world class learning that

was delivered to employee independent of time and

distances.


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Your organization is also focused on building an internal

array of trainers and coaches who are committed

to developing employees by bringing in skills and

contextual expertise in a sustained manner. This has

generated excitement and augmented opportunities for

cross functional collaborations and conversations.

People Review Process was initiated to map and

capture people capability in the organization aiming

towards succession planning for the organization

and growth for individuals. Promoting quality

conversation was given thrust across organization

through different HR processes and initiatives.

Our organization placed a specic focus in the area

of ethics and code of conduct. Creating heightened

awareness amongst employees by way of active

engagement across the country was a big initiative

this year.Employee Engagement is one of the key elements

in the success of an organization. Your organization

has embarked upon a path to build engagement

among employees through the appreciative enquiry

methodology. The rst set of programs was launched

for eld sales organization in India that has lead to

greater employee engagement and energy amongst

the eld sales force.

4. BUSINESS CONTINUITY PLANNING

As your Company charts ambitious growth plans,it is imperative to ensure that unexpected events

do not disrupt existing operations by putting in the

necessary processes and tools to ensure business

continuity. Your Company has embarked on an

enterprise wide Business Continuity Planning (BCP)

initiative to evaluate risks arising from a disaster

perspective and to recommend processes and tools

to proactively mitigate the impact to ensure that

business operations are not disrupted. This exercise

covers all the existing businesses and will address

locational as well as systemic risks.

5. CORPORATE SOCIAL RESPONSIBILITY

Your Company believes that for growth to be

responsible, it should go beyond numbers. It should

do good to the society, create a better world, and

accordingly it is strongly aligned in its drive to create

and enhance stakeholder value with its commitment

to good governance, ethical conduct and social

responsibility. The key areas where it is striving to

make a difference include socially relevant causes

such as Elderly Care, Healthcare, Education and

Water Conservation.

The manufacturing units at Kasna (Uttar Pradesh),

Patancheru (Andhra Pradesh), Sriperumbudur (Tamil

Nadu) and Ankleshwar (Gujarat) have been doingtheir bit to make a positive difference to the lives of

the disadvantaged elderly citizens of the neighboring

localities. The Mobile Medicare Units (MMUs) being

operated in association with the NGO HelpAge India

has made it possible to reach the doorsteps of the

needy senior citizens. Several blood donation camps

and other healthcare camps were conducted during

the year including a camp on cataract surgery with

the motto of helping the needy elderly citizens see

colour again.

Your Company strives to use the scarce resourceof water efciently by recycling and reusing,

wherever possible. The Total Water Management

(TWM) Centre located in the premises of your

Companys manufacturing facility in Mumbai has

been championing the issue of water conversation;

informing and demonstrating techniques of water

harvesting to the public at large.

6. INFORMATION TECHNOLOGY

During 2010-11, your Company embarked on

an ambitious journey in the area of InformationManagement. In the dynamic and growing business

scenario, leveraging the information assets to

help managers make quicker and better decisions

through the analysis of key trends and events that

affect business is becoming an important factor

for sustaining market leadership and competitive

advantage. A three year roadmap was drawn up in

the area of Information Management that will help

in improving speed, governance and performance

of business by using all types of data, content and

state of art analytics. The project will be executed

in multiple phases spanning two years and the key

phase of determining the Business Intelligence

Strategy for your Company has been completed.

As your Company continues to grow and setup

highly automated paint manufacturing facilities, it is

very critical that information ow from the shop oor

to the top oor is seamless. Advanced Manufacturing

Execution Systems have been deployed in both


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Rohtak and Sriperumbudur plants to optimize the

material ow and provide real time information

visibility to shop oor operations to aid better decision

making. We are proud of the core capabilities that

have been built by your Company in managing

these complex integrations and the same will hold

us in good stead as and when newer and complex

automated factories are setup in coming years.

As the power of social collaboration using tools like

Facebook and Twitter sweeps across the world,

tremendous benets can be realized by unleashing

the power of information democracy within the

enterprise by empowering employees, partners and

customers to connect easily. Your Company too has

realized the potential benets of such platforms and

has been an early adopter in deploying Enterprise

Social Collaboration platforms to facilitate exchangeof ideas, building of vibrant virtual communities to

foster innovation to ultimately sustain competitive

advantage in the marketplace.

7. RESEARCH & DEVELOPMENT

Your Company is executing an integrated strategy

for technology development and deployment. The

technology function is supporting your Companys

strategy around four missions: technology

development, development of substantially newproducts, productivity improvement and cost

reduction. The focus for your Company in the

nancial year 2010-11 had been to maintain the

lead in the development of environment friendly

products. During the year new emulsions platforms

have been exploited to allow for the development

of eco friendly binders. New products offer the

customer choice of water-based alternates to solvent

borne systems. Efforts have focused in the area of

developing paints with reduced Volatile Organic

Contents (VOC) much in line with leading paintcompanies across the globe. This is to allow your

Company to meet the mid and long terms strategic

goals. A number of development programs aimed

at productivity improvement and energy efciency

have borne fruit and their implementation is well

underway. Cost reduction programs continue with

renewed vigor. Widespread shortage of crucial raw

materials is foreseen as the demand for materials

is picking up with revival of economies of several

countries. In this context, your Company is actively

working on alternate raw materials to ensure that its

ability to service its customers remains unaffected.

Your Company continues to work in collaboration

with leading academia to bring new knowledge intobusiness and vendors with international presence toleverage the latest developments happening in other

countries. Some of these programs are bearing fruitand will strengthen the overall technical capabilitiesin the area of resins and emulsions development.Your Company continues to increase its presencein international forums through publications inpeer review journals. The recognition of the workof its scientists is helping shape an image of theorganization that attracts competent and committedscientists. Indeed, during the year your Companyhas been able to attract talent from international

universities to strengthen its in house research base.

8. INTERNAL CONTROL SYSTEMS ANDTHEIR ADEQUACY

Your Company is committed to carry out its operations

within a well dened control framework. The control

framework is anchored on good governance, sound

internal controls and an independent internal audit.

The framework was further strengthened during

the year through a mix of initiatives on all the three

aspects. Most noteworthy among them are:

1. A revised code of conduct was published. The

code of conduct was extended to all employees

and communication workshops held with the

employees.

2. Your Company announced a whistle blower

policy to its employees and key external stake

holders. Any communication received under

this policy is treated with condentiality and

investigated by a high powered committee in the

organization.

3. The shared service center set up last year was

streamlined. A concurrent audit of its operationsis done to have an additional pair of eyes

monitoring the operations.

4. Your Company has, during the year, revisited

policies and process manuals and made

modications wherever required. These were

communicated to all in your Company.

The above initiatives have strengthened the

governance framework within your Company. Along


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with increased levels of manual and automated

controls, these initiatives provide a good internal

check over the day to day operations of your

Company.

To complement the existing controls and to have an

independent review of the adequacy and operation ofexisting controls, your Company has an independent

internal audit department which carries out periodic

risk based audits of operations and key processes

in your Company. The audit plan is approved by the

Audit Committee of the Board and the Chief Internal

Auditor periodically reports any control gaps along

with management action plan to the Audit Committee.

Your Company has a separate Risk Management

Council which meets periodically to identify, assess

and mitigate key strategic and business risks facing

the organization. Milestones are arrived at andprogress against the same monitored periodically.

9. RISK AND OUTLOOK

The overall economic outlook for 2011-12 appears

to be positive but challenging. Economic activity is

expected to be buoyant in the Indian sub continent

driven by good internal as well as export demand,

with Indian GDP expected to register a growth of

around 8%. Also, with early forecast predicting a

normal monsoon in 2011-12, your Company expects

the rural economy to perform well and support paint

demand in the rural areas. The market for Industrial

products is expected to improve on the back of thrust

on infrastructure development and industrial growth.

However, there are certain risks that can impact the

performance of your Company.

The turmoil in the Middle East and North African

region has already affected global crude supplies

and prices. The events in Japan after the tsunami

might force a re-look on nuclear energy globally.

Amidst widespread concern on nuclear danger, it is

expected that fossil fuel consumption will only go up

in the near future for lack of other reliable and proven

sources. This could have a long term impact on the

prices of these commodities globally.

Costs of some other key raw materials like Titanium

Dioxide are expected to inch up due to their relative

shortage, inadequate investment in fresh capacities

and buoyant demand conditions.

Specic to India, factors like power shortages

increase in labour cost and transportation cost could

also contribute to ination.

All these factors could put pressure on margins of

products of your Company and force price hikes.

Such price hikes, if any, could directly have an effect

on the demand of the products.

Risks of sovereign defaults in the European Union

remain and the recovery in rest of the developedworld is still quite fragile. Amidst talk of phasing out

and withdrawal of stimulus measures, it remains to be

seen whether growth can be sustained going forward.

The recent unearthing of huge scams and the

resulting logjam in government functioning could lead

to policy reform taking a backseat thereby affecting

the long term growth potential of the country apart

from impacting investor sentiments.

Reserve Bank of India (RBI) has announced a

series of rate hikes in FY 2010-11 and more hikesare expected in FY 2011-12 in a bid to control the

spiraling ination. This can have an adverse impact

on demand, particularly in interest rate sensitive

sectors like housing and automobiles.

Directional movements of currency are hard to

predict and volatility in currency movements might

have nancial implications for your Company.

Additionally, adverse impact of the political turmoil

in Middle East or any other political, economic or

natural crisis where your Company has signicant

presence can also affect the business performance

of your Company.

23


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Asian Paints Limited Asian Paints Limited Group

Consolidated

2010-11 2009-10 Growth

(%)

2010-11 2009-10 Growth

(%)

Sales and Operating Income (Net) 6322.24 5125.08 23.4 7706.24 6680.94 15.3

Operating Prot 1232.66 1153.71 6.8 1395.60 1367.90 2.0

Less: Interest 15.35 13.76 22.23 28.47

Less: Depreciation 94.48 60.74 113.13 83.56

Prot before Tax and exceptional item 1122.83 1079.21 4.0 1260.24 1255.87 0.3

Add/(Less): Exceptional item - 25.46 - - 1.15

Prot before Tax 1122.83 1104.67 1.6 1260.24 1257.02 0.3

Less: Provision for Taxes 347.68 330.17 378.89 373.11

Prot After Tax 775.15 774.50 0.1 881.35 883.91 (0.3)

Less: Minority interest - - - 38.11 48.27

Net Prot attributable to shareholders of

the Company

775.15 774.50 0.1 843.24 835.64 0.9

Add: Balance brought forward from the

previous year

600.00 230.00 600.00 230.00

DISPOSABLE PROFIT 1375.15 1004.50 1443.24 1065.64

That the Directors recommend for

appropriation as under:

Dividend - Interim 81.53 81.53 81.53 81.53

- Final 225.41 177.45 225.41 177.45Tax on Dividend 50.11 43.33 50.11 43.33

Transfer to General Reserve 418.10 102.19 486.19 163.33

Balance carried forward to Balance Sheet 600.00 600.00 600.00 600.00

DIRECTORS REPORT

Dear Members,

Your Directors have pleasure in presenting the 65th

Annual Report of your Company and the Audited Accounts forthe nancial year ended 31st March, 2011.

FINANCIAL RESULTS(` in Crores)


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STANDALONE FINANCIALS

Net sales and operating income for the standalone

entity increased to ` 6,322.24 crores from ` 5,125.08

crores in the previous year a growth of 23.4%. The

operating prot (PBDIT) increased by 6.8%, from

`1,153.71 crores to

`1,232.66 crores. The prot aftertax for the current year is ` 775.15 crores as against

` 774.50 crores in the previous year.

CONSOLIDATED FINANCIALS

The consolidated sales and operating income net of

discounts and excise duty increased to ` 7,706.24

crores from ` 6,680.94 crores growth of 15.3%.

Net prot after minority interest for the group for the

current year is ` 843.24 as against ` 835.64 crores in

the previous year.

CONSOLIDATED ACCOUNTS

The Ministry of Corporate Affairs (MCA) by General

Circular No. 2/2011 dated 8th February, 2011, issued

a direction under Section 212(8) of the Companies

Act, 1956 that the provisions of Section 212 shall not

apply to Companies in relation to their subsidiaries,

subject to fullling certain conditions mentioned in

the said circular with immediate effect. The Board

of Directors of your Company at its meeting held on

10th May, 2011, approved the Audited Consolidated

Financial Statements for the nancial year 2010-11

in accordance with the Accounting Standard (AS21)

and other Accounting Standards issued by the Institute

of Chartered Accountants of India as well as Clause

32 of the Listing Agreement, which include nancial

information of all its subsidiaries, and forms part of this

report. The Consolidated Financial Statements of your

Company for the nancial year 2010-11, are prepared

in compliance with applicable Accounting Standards

and where applicable Listing Agreement as prescribed

by the Securities and Exchange Board of India.

The annual accounts and nancial statements of thesubsidiary companies of your Company and related

detailed information shall be made available to

members on request and are open for inspection at the

Registered Ofce of your Company. Your Company

has complied with all the conditions as stated in

the circular and accordingly has not attached the

nancial statements of its subsidiary Companies for

the nancial year 2010-11. A statement of summarized

nancials of all subsidiaries of your Company including

capital, reserves, total assets, total liabilities, details

of investment, turnover, etc., pursuant to the General

Circular issued by Ministry of Corporate Ofce, forms

part of this report.

The Consolidated Financial Statements include

results and nancial statements of certain

subsidiaries of your Company for the previous year

for a fteen month period from 1st January, 2009 to

31st March, 2010. This was done to align the accounting

year of those subsidiary Companies with your

Company in the previous year. Thus, the current year

gures are not comparable with the corresponding

gures for the previous year.

DIVIDEND

During the nancial year 2010-11, your Company

declared and paid an interim dividend of ` 8.50 per

equity share in the month of November, 2010. In

addition, your Directors recommend payment of

` 23.50 per equity share as the nal dividend for the

nancial year ended 31st March, 2011. If approved,

the total dividend (interim and nal dividend) for the

nancial year 2010-11 will be ` 32.00 per equity share;

` 27 per equity share was paid as dividend for the

previous year.

TRANSFER TO RESERVES

Your Company proposes to transfer ` 418.10 crores

to the general reserve. An amount of ` 600 crores

is proposed to be retained in the prot and loss

account.

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed review of operations, performance and

future outlook of your Company and its businesses

is given in the Management Discussion and Analysis,

which forms part of this Report.

CORPORATE GOVERNANCE

During the nancial year, Asian Centre for Corporate

Governance and Sustainability at its 11th International

Conference on Governance and Sustainability held

in February, 2011 recognised your Companys Audit

Committee as Best Audit Committee for the year

Asian Paints Limited Annual Report 2010-2011


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2010. Your Company places on record its appreciation

for the Audit Committee for its outstanding contribution

in promoting the philosophy and culture of good

governance and sustainable development in your

Company.

Your Company is compliant with the requirementsof Clause 49 of the Listing Agreement. Necessary

disclosures have been made in this regard in the

Corporate Governance Report. A certicate from the

Joint Statutory Auditors of your Company regarding

compliance with the requirements of Corporate

Governance as stipulated under Clause 49 of the

Listing Agreement is attached to this report. The report

on Corporate Governance is included and forms part

of this report.

SECRETARIAL AUDIT

Dr. K. R. Chandratre, Practicing Company Secretary

conducted Secretarial Audit pursuant to provisions

of Section 383A of the Companies Act, 1956, for

the nancial year 2010-11. Dr. K. R. Chandratre has

submitted the Report conrming compliance with the

applicable provisions of Companies Act, 1956 and

other rules and regulations issued by SEBI/other

regulatory authorities for Corporate law.

EXPANSION OF THE JOINT VENTURE WITH PPG

INDUSTRIES INC., USA, AND ACCELERATION OFGROWTH OF THE NON-DECORATIVE COATINGS

BUSINESS

During the year 2010-11, your Company has decided

to enhance its fourteen year relationship with PPG

Industries Inc., USA (PPG), one of the worlds leading

coatings and specialty products company in order

to accelerate growth of the non-decorative coatings

businesses in India. As part of this arrangement, your

Company and PPG have decided to enhance the

existing presence in India by expanding the current

50-50 joint venture relationship, Asian PPG Industries

Limited (APPG), by partnering in all segments of the

coatings space in India except decorative coatings

and also establish a second 50:50 joint venture.

APPG currently services the Indian transportation

coatings markets and this change will expand its scope

to additionally service the industrial liquid, marine

and consumer packaging markets. The second joint

venture will service the protective, industrial powder,

industrial containers and light industrial coatings

markets.

The formation of the second Joint Venture involvescertain statutory and procedural formalities to be

complied with. As a rst step to the joint venture

formation, a new company named AP Coatings

Limited (100% owned subsidiary of your Company)

was formed. Till the formation of new Joint Venture,

the Industrial business of your Company as well as the

business of Asian Paints Industrial Coatings Limited

(APICL, your Companys wholly owned subsidiary

carrying on the business of powder coatings) will be

carried out by AP Coatings Limited.

AP Coatings Limited along with two Indian subsidiaries

of PPG will merge into APPG and thereafter, certain

businesses will demerge into the new 50:50 Joint

Venture Company. This arrangement is subject to

regulatory approvals and pending lling of applications

and petitions for merger and demerger in accordance

with Section 391 to 394 of the Companies Act, 1956,

before the Honble High Court(s) and the subsequent

sanction by the respective High Court(s).

Your Company will have effective managementcontrol in the second joint venture while PPG will

take the lead in APPG. This would enable utilization

of respective strengths in order to capture the growth

in infrastructure development and globally driven

markets in India.

FIXED DEPOSITS

Your Company has not accepted any xed deposits

during the year 2010-11 and there are no outstanding

xed deposits from the public as on 31st

March, 2011.

INSURANCE

All the insurable interests of your Company including

inventories, buildings, plant and machinery and

liabilities under legislative enactments are adequately

insured.


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CONSERVATION OF ENERGY AND TECHNOLOGY

ABSORPTION

Particulars in respect of conservation of energy and

technology absorption by the Company as per Section

217(1)(e) of the Companies Act, 1956, are given as

Annexure to this report in Form A and B, respectively.

FOREIGN EXCHANGE EARNINGS AND OUTGO

Details of expenditure and earnings in foreign

currencies are given under Schedule M to the

nancial statements.

PERSONNEL

The Ministry of Corporate Affairs by notication

dated 31st March, 2011, issued the Companies

(Particulars of Employees) Amendment Rules, 2011,

which amended the limits of remuneration of theemployees mentioned under Companies (Particulars

of Employees) Rule, 1975. Accordingly, as per the

Companies (Particulars of Employees) Amendment

Rules, 2011 and the provisions of Section 217(2A) of

the Companies Act, 1956, details of the names and

other particulars of employees drawing remuneration

aggregating to more than ` 60,00,000 (Rupees Sixty

Lacs Only) per annum and ` 5,00,000 (Rupees Five

Lacs) per month, are required to be attached to this

report. However, as per the provisions of Section

219(1)(b)(iv) of the Companies Act, 1956, the Reportand Annual Accounts of your Company sent to the

shareholders do not contain the said annexure. Any

shareholder desirous of obtaining a copy of the said

annexure may write to the Company Secretary at the

Registered Ofce of the Company.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act,

1956, the Directors hereby conrm that:

l In preparation of the annual accounts, theapplicable accounting standards have been

followed.

l The accounting policies have been selected

and applied consistently and the judgments and

estimates made, are reasonable and prudent, so

as to give a true and fair view of the state of affairs

of the Company as on 31st March, 2011 and of the

prot and loss of the Company for that period.

l Proper and sufcient care has been taken for the

maintenance of adequate accounting records in

accordance with the provisions of the Companies

Act, 1956, for safeguarding the assets of theCompany and for preventing and detecting fraud

and other irregularities.

l The annual accounts have been prepared on a

going concern basis.

DIRECTORS

Mr. P. M. Murty, Managing Director & CEO of

your Company was awarded the CEO of the

Year by Business Standard for the year 2009-10.

Mr. P. M. Murty was felicitated by the Honble Prime

Minister Shri Manmohan Singh in New Delhi on25th March, 2011. Your Company congratulates

Mr. P.M. Murty for this recognition and is proud of his

contribution to the growth of your Company.

Mr. Deepak Satwalekar was recognised and awarded

the Best Independent Director-2010 by the Global

Advisory Board of Asian Centre for Corporate

Governance & Sustainability at its 11th International

Conference on Governance and Sustainability held

in February, 2011. Your Company congratulates

Mr. Deepak Satwalekar for this recognition.

As disclosed in the last years Annual Report,

Mr. Hasit Dani resigned as a Non-Executive Director of

your Company on 3rd June, 2010. During the nancial

year 2010-11, the Board of Directors appointed Mrs.

Ina Dani as an Additional Director with effect from

27th July, 2010. Mrs. Ina Dani is being appointed as the

Director of your Company at the forthcoming Annual

General Meeting. Your Directors recommend her

appointment as a Director of your Company.

In accordance with the provisions of the Companies Act,

1956 and the Articles of Association of the Company,

Mr. Dipankar Basu, Mr. Deepak Satwalekar, Mr. Amar

Vakil and Mr. R. A. Shah retire by rotation at the

conclusion of the forthcoming Annual General Meeting

and being eligible, offer themselves for re-appointment.

Appropriate resolutions for their re-appointment are

being placed before you for your approval at the



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ensuing Annual General Meeting. The brief resume

of the aforesaid Directors and other information have

been detailed in the Notice. Your Directors recommend

their re-appointment as Directors of your Company.

AUDITORS

M/s. Shah & Co., Chartered Accountants andM/s. B S R & Associates, Chartered Accountants, Joint

Auditors of your Company are due for retirement at

the ensuing Annual General Meeting and are eligible

for re-appointment. Your Directors recommend their

re-appointment for the ensuing year. The Statutory

Auditors of your Company have submitted a certicate

to your Company that they have subjected themselves

for the peer review process of the Institute of Chartered

Accountants of India for the nancial year 2010-11.

COST AUDITOR

Your Company has received approval from the

Central Government for appointment of Ms. Ketki

Visariya, as the Cost Auditor of the Company for the

nancial year 2010-11 to conduct the audit of the cost

28

records of the Company. Futher, the due date for

submission of Cost Audit Report for the FY 2010-11 is

27th September, 2011.

APPRECIATION

Your Directors wish to thank and place on record their

appreciation for all the employees at all levels for theirhard work, solidarity, co-operation and support during

the year. Your Directors wish to place on record their

appreciation to customers, shareholders, vendors and

bankers for their continued support.

For and on behalf of the Board

Ashwin ChoksiChairman

Mumbai

10th May, 2011


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Annexure to Directors Report

Form A

Disclosure of particulars with respect to Conservation of Energy:

Particulars 2010-11 2009-10

A Power and fuel consumption

1. Electricity

a) Purchased

Units (000 KWH) 29,262 30,550

Total Amount (` in Crores) 14.89 14.20

Rate per unit (`) 5.09 4.65

b) Own Generation

Through diesel Generator

Units (000 KWH) 18,276 7,390

Units per ltr of diesel oil 3.53 3.30Cost/unit (`) 10.24 10.19

Natural Gas

Units (000 KWH) 6,430 6,572

Units per nm3 3.32 3.33

Cost/unit (`) 5.23 4.66

2. Coal

Quantity (in MTs) 18,182 15,688

` in Crores 8.66 5.98

Average rate/MT (`) 4,761 3,812

3. DieselQuantity (in KL) 1,642 1,485

` in Crores 6.21 5.10

Average rate/KL (`) 37.82 34.34

4. Furnace Oil

Quantity (in MTs) 1,209 978

` in Crores 3.61 2.42

Average rate (`) 29.88 24.71

5. Natural Gas

Quantity (in 000 cubic m.) 3,514 3,379

Total Amount (` in Crores) 5.73 4.69Average rate (`) 16.40 13.88

Electricity Furnace Oil Natural Gas Coal Diesel

2010-11 2009-10 2010-11 2009-10 2010-11 2009-10 2010-11 2009-10 2010-11 2009-10

Paints 110 98 3 2 4 5 - - 3 4

Phthalic 62 45 - - 69 62 - - -

Penta 120 646 - 1 - - 3 3 - -

B. Consumption per unit of production



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Annexure to Directors Report

Form B

Disclosure of particulars with respect to technology absorption:

Research and Development (R&D)

1. Specic area in which R&D is carried out by the Company.

The R&D Unit of your Company is carrying out the following activities to support the business goals of your Company:

l Development of new products and processes related to surface coatings and intermediates.

l Value engineering through formulation re-engineering and identication of new and alternate raw materials.

l Upgradation of existing product and processes.

l Technology support of all overseas units.

l Optimization of products and processes to minimize waste generation and reduce environmental and safetyconcerns.

l Development of new application techniques for various substrates.

l

Import substitution and identication of new raw material for development. l Development of new analytical test methods, characterization techniques.

l Collaborative development with vendors, academia and institutes.

l Development of domain expertise to expedite product development.

l Research on new functional polymers, emulsions and nano technology.

2. Benets derived as a result of above R&D:

l Productivity improvement in manufacture of machine colorants.

l Opacity improvement for select Premium Gloss Enamel shades.

l New factory made shade in the Premium Gloss Enamel range, Mahogany was launched.

l Royale Luster Emulsion was launched.

l Productivity improvement and energy savings in water based paint manufacture.

l Two textured nishes Pebbletex and Crosstex for exterior application launched.

l PU Pallette Metallic launched.

l Royale Play Stucco launched.

l Developed Economical Mono coat Stoving Black Enamel for 3 Wheeler industry.

l Developed Polyester Amino mono coat for automotive OEM segment.

l Developed Fleet PU range of Enamels for Auto Renish market.

l Development of high solid high build splash zone epoxy coating capable of offering DFT up to 1500 micron in single

coat by airless application. l Development of 2K tough elastomeric polyurethane membrane for car park deck coating.

l Development of 3K heavy duty self levelling water based polyurethane ooring.

l Development of ambient cure high build heat resistant polysiloxane coating having dry heat resistance up to600 deg C.

l Development of rapid recoat epoxy MIO intermediate suitable for recoating within 90 mins.

l Development of high strength epoxy repair mortar for industrial concrete oorings.


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3. Further plan of action:

Your Company considers the development of technical capabilities to sustain its competitive position in the market placeof primary importance. In order to address the needs of the customers in a rapidly changing market place, the Companywill continue to strengthen its technical programs and the skills of its technical personnel. Building on earlier activitiesthat have paid off. Your Company will continue to develop advanced technical capabilities and technology platforms tosupport its product plans, improve its manufacturing and open new applications.

4. Expenditure on R & D during the year is as follows:

(` in Crores)

Particulars 2010-11 2009-10

Capital 3.67 1.21

Recurring 32.23 28.43

Total 35.90 29.64

Net Sales and operating income 6,322 5,125

R & D expenditure as % of net sales and operating income 0.57% 0.58%

Techn ology absorption, adaptation and innovation:

All developments were done indigenously.

Foreign exchange earnings and outgo:

Your Companys exports primarily consist of Di-pentaerythritol and Monopentaerythritol to USA, South America andEurope. The Di-pentaerythritol is used mainly as an additive in the manufacture of lubricants and refrigerants and theMonopentaerythritol is mainly used in the manufacture of explosives. The demand for your Companys products fromthese markets was stable during the year.

Your Company also exports certain other items to its overseas units and licensees. Machine tinting colorants andresins form the bulk of material exported. Specic products or special products which are of low volume for domesticmanufacture by the overseas units are also produced and exported to the units from India. Support is extended tooverseas units through export of marketing materials and machinery parts. Export queries received in India fromcountries where your Company has operations is routed through respective overseas units.

For and on behalf of the Board

Ashwin Choksi

Chairman

Mumbai10th May, 2011



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Auditors Report to the Members of Asian Paints Limited

We have audited the attached Balance Sheet of Asian Paints Limited (the Company) as at 31st March 2011, and also the

Prot and Loss Account and the Cash Flow Statement of the Company for the year ended on that date, annexed thereto.

These nancial statements are the responsibility of the Companys management. Our responsibility is to express an

opinion on these nancial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India.

Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the nancial

statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the

amounts and disclosures in the nancial statements. An audit also includes assessing the accounting principles used and

signicant estimates made by management, as well as evaluating the overall nancial statement presentation. We believe

that our audit provides a reasonable basis of our opinion.

As required by the Companies (Auditors Report) Order, 2003, issued by the Central Government of India in terms of

sub-section (4A) of Section 227 of the Companies Act, 1956 (the Act), we enclose in the Annexure a statement on the

matters specied in paragraphs 4 and 5 of the said order to the extent applicable.

Further to our comments in the Annexure referred to above, we report that:

(a) we have obtained all the information and explanations, which to the best of our knowledge and belief were necessaryfor the purpose of our audit;

(b) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from

our examination of those books;

(c) the Balance Sheet, Prot and Loss Account and Cash Flow Statement referred to in this report are in agreement with

the books of account;

(d) in our opinion, the Balance Sheet, Prot and Loss Account and Cash Flow Statement dealt with by this report comply

with the Accounting Standards referred to in Section 211(3C) of the Act.

(e) on the basis of the written representations received from the Directors of the Company as at 31st March 2011, and

taken on record by the Board of Directors, we report that none of the directors of the Company is disqualied as on

31st March 2011 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Act;

and

(f) in our opinion, and to the best of our information and according to the explanations given to us, the said nancial

statements give the information required by the Act, in the prescribed manner and give a true and fair view in conformity

with the accounting principles generally accepted in India:

(i) in the case of the Balance Sheet, of the state of affairs of the Company as on 31st March 2011;

(ii) in the case of the Prot and Loss Account, of the prot of the Company for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of the cash ows for the year ended on that date.

For Shah & Co. For B S R & Associates

Chartered Accountants Chartered Accountants

Firm Registration No.: 109430W Firm Registration No.: 116231W

H. N. Shah Natrajh Ramakrishna

Partner Partner

Membership No.: 08152 Membership No.: 32815

Mumbai

10th May, 2011


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Annexure to the Auditors Report - 31st March, 2011

(Referred to in our report of even date)

1. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation

of the xed assets.

(b) The Company has a regular programme of physical verication of its xed assets by which all the xed assetsare veried in a phased manner, over a period of 3 years. In our opinion, this periodicity of physical verication

is reasonable, having regard to the size of the Company and the nature of its assets. No material discrepancies

were noticed on such verication.

(c) Fixed assets disposed off during the year were not substantial and therefore do not affect the going concern

assumption.

2. (a) The inventory, except goods-in-transit and stocks lying with third parties, have been physically veried by the

management during the year. In our opinion, the frequency of verication is reasonable. For stocks lying with

third parties at the year end written conrmations, have been obtained.

(b) The procedures for the physical verication of inventories followed by the management are reasonable and

adequate in relation to the size of the Company and the nature of its business.(c) The Company has maintained proper records of inventory. The discrepancies noticed on verication between

the physical stocks and book records were not material.

3. The Company has neither granted nor taken any loans, secured or unsecured, to or from companies, rms or other

parties covered in the register required to be maintained under Section 301 of the Act.

4. In our opinion and according to the information and explanations given to us, there is an adequate internal control

system commensurate with the size of the Company and the nature of its business with regard to purchase of

inventories and xed assets and with regard to sale of goods and services. We have not observed any major weakness

in the internal control system during the course of the audit.

5. (a) According to the information and explanations given to us, the particulars of all contracts and arrangements referred

to in Section 301 of the Act, have been entered in the register required to be maintained under that section.

(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance

of contracts and arrangements referred to in (a) above and exceeding the value of ` 5 lakh with any party during

the year have been made at prices which are reasonable having regard to the prevailing market prices at the

relevant time.

6. The Company has not accepted any deposits from the public.

7. In our opinion the Company has an internal audit system commensurate with the size and nature of its business.

8. We have broadly reviewed the books of accounts maintained by the Company pursuant to the rules prescribed by

the Central Government for the maintenance of cost records under Section 209(1) (d) of the Act in respect of paints,

resins and pentaerythritol and are of the opinion that prima facie, the prescribed accounts and records have been

made and maintained. However, we have not made a detailed examination of the records.

9. (a) According to the information and explanations given to us and on the basis of our examination of the records

of the Company, amounts deducted/accrued in the books of account in respect of undisputed statutory dues

including Provident Fund, Employees State Insurance, Investor Education and Protection Fund, Income tax,

Sales tax, Wealth tax, Service tax, Customs duty, Excise duty, Cess and other material statutory dues have

been generally regularly deposited during the year by the Company with the appropriate authorities. According

to the information and explanations given to us, no undisputed amounts payable in respect of Provident Fund,

Employees State Insurance, Investor Education and Protection Fund, Income tax, Sales tax, Wealth tax, Service

tax, Customs duty, Excise duty, Cess and other material statutory dues were in arrears as at 31st March, 2011

for a period of more than six months from the date they became payable.


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There were no dues on account of Cess under Section 441A of the Act, since the date from which the aforesaid

section comes into force has not yet been notied by the Central Government.

(b) According to the information and explanations given to us, the following dues have not been deposited by the

Company on account of disputes.

Name of the

Statute

Nature of dues Financial Year Amount

(` in Crores)

Forum where

dispute is pending

Sales Tax Assessment

Dues

F.Y. 1994-95 to 1995-96,

F.Y. 1997-98, F.Y. 2000-01

to 2009-10

15.89 First Appellate level

F.Y. 1999-00 to 2001-02,

F.Y. 2003-04 to 2006-07

0.79 Second Appellate

level

F.Y. 1991-92, F.Y. 1993-94,

F.Y. 1996-97 to 1998-99,

F.Y. 2000-01 to 2006-07

8.83 Tribunal

F.Y. 1993-94, F.Y. 1997-98,

F.Y. 2000-01 to 2006-07

1.34 High court

F.Y. 1992-93, 1993-94 0.16 Supreme Court

Total (A) 27.01

Central Excise

Act, 1944

Dispute relating

to Excise duty

F.Y. 1994-95, F.Y. 2007-08 0.14 First Appellate

F.Y. 1992-93 to 1993-94,

F.Y. 1995-96 to 2003-04,

F.Y. 2006-07 to 2010-11

0.27 Tribunal

F.Y. 1969-70 to 1972-73,

F.Y. 1998-99 to 1999-00

0.09 High Court

Total (B) 0.50

Income Tax IT matters under

dispute

A.Y. 2004-05 and

A.Y. 2008-09 to 2010-11

A.Y. 2003-04 and A.Y. 2007-08

0.92

1.20

Assessing ofcer

First Appellate

A.Y. 1996-97 to A.Y. 1999-00

and A.Y. 2005-06

4.67 Tribunal

Total (C) 6.79

Grand Total (A)+(B)+(C) 34.30

10. The Company does not have any accumulated losses at the end of the nancial year and has not incurred cash

losses in the cur

ar10-11 asian paints

Documents